Commentary: Draft Executive Order on Contractor Disclosure of Political Contributions Is Important Accountability Tool

5/4/2011

In late April, a draft executive order (E.O.) that had been circulating among federal agencies was leaked to the press. The draft order calls for potential federal contractors to disclose their political spending, and it has generated both support and harsh criticism.

In spite of the clamor emanating from conservatives and the business community, the draft E.O. is, according to some advocates (including OMB Watch), an important first step toward curbing the harmful effects of the deluge of corporate money that has begun flowing into our political system since the Citizens United v. Federal Election Commission case was decided by the U.S. Supreme Court in 2010. The draft E.O. is also a significant down payment on the president’s campaign promise to address the growing influence of special interests in Washington.

As written, the draft E.O. would require "any entity bidding for a government contract to disclose political contributions to federal candidates or parties made within the past two years that, in aggregate, exceed $5,000." The disclosure would "include contributions made by the entity’s directors and officers as well as its affiliates and subsidiaries." Disclosure would also include contributions made to third parties, including trade associations and 501(c)(4) organizations, that intend to use those funds to make independent expenditures in support of or opposition to candidates or to engage in electioneering communications, such as paid political ads. This is the first time third-party contributions would be publicly disclosed.

The disclosed information would be available through a searchable, downloadable database on Data.gov. Those that win federal contracts must certify that they have disclosed the information as a condition of receiving the award. The E.O. calls on the Federal Acquisition Regulatory (FAR) Council to develop rules to implement the E.O. by the end of 2011. Thus, the new disclosure requirements would apply to contract solicitations that occur before the next election cycle.

Conservative politicians and private industry trade groups, such as the U.S. Chamber of Commerce and the Professional Services Council (PSC), pounced on the leaked document, decrying what they claim is the draft order's partisan flavor. In what represents the standard refutation of the proposed E.O., 27 Republican senators sent a letter to President Obama on Apr. 26 urging him not to issue the order, which they contend "would make political considerations a part of every federal contract offer."

The letter makes three arguments. First, it states that the requirement that a potential contractor, including a company's directors, officers, affiliates, or subsidiaries, must furnish information about political activities to federal agencies would "have a chilling effect" on free speech. Second, the letter asserts that the requirement to submit this information directly to federal agencies would create "the appearance that contract award decisions could be predicated on – or influenced by – political contributions or considerations." Lastly, because the draft E.O. shares some similarities with the failed DISCLOSE Act, the senators claim that the order "may be an effort to circumvent Congress." Additionally, the letter raises a number of other operational questions, such as why the disclosure requirement looks back over a two-year period.

On the first point, there is nothing in the draft E.O. that would "chill" free speech. Detractors would like to paint this as the Obama administration attempting to pick political winners and losers through selective disclosure of political contributions. That argument, however, requires one to assume the president is acting in bad faith and using transparency as a shield. The charge withers when examined within the context of the Obama administration's efforts on government transparency.

In addition, corporations often act politically through their boards of directors, officers, affiliates, and subsidiaries, so it is not outrageous to ask for disclosure of their political contributions. And while free speech is an activity protected by the First Amendment, which implies some modicum of privacy, the Federal Election Commission (FEC) already requires disclosure of individuals' contributions when they exceed $200.

Critics are also peddling a false dichotomy when they make a related argument about the draft E.O. applying to the business community – an ostensibly pro-Republican lot – but not unions, an ostensibly pro-Democratic lot. First, the Internal Revenue Service (IRS) considers unions to be corporations under the tax code. Second, like any other potential contractor, a union would have to disclose its political contributions if it bid on a federal contract. Several unions currently bid for federal contracts.

More to the point, there is nothing in the E.O. that suggests that procurement officers are to use information about political contributions in determining who wins contracts. Final regulations can be clear that will not happen.

Furthermore, if an entity does not wish to disclose its political contributions, it need not apply for a federal contract. But what do potential contractors have to hide? Are they ashamed of their direct and/or indirect political contributions? Given the numerous pay-to-play scandals over the years, it would seem that disclosure makes sense here as long as the rules are very clear that procurement officers are not to use political contributions as criteria in selecting awardees.

Thus, charges that the "force-feeding [of political contribution] information to government contracting officers, who would otherwise never consider such factors in a source selection ... [would] inject politics into the source selection process" are unfounded and run counter to the public interest.

The third charge about making an end-run around Congress is a backhanded way of saying that President Obama is staying true to his belief that disclosure of corporate campaign spending is essential to democracy, as he acts within the bounds of the executive branch to do so. Indeed, there is nothing improper or illegal about the administration addressing the deluge of corporate money that the Citizens United decision allowed to start flowing into the political process.

In effect, this order would place a reasonable requirement on those wishing to do business with the federal government. The government already makes those wishing to receive taxpayer dollars comply with a number of requirements, from how they can and cannot use the money, to environmental and labor standards. A requirement to disclose political contributions may be no more burdensome than those requirements.

However, the fleshing out of the draft E.O. through federal regulations will be important because specifics are going to matter. One could imagine both burdensome and relatively burden-free requirements to impose on potential federal contractors about the reporting of their political spending.

The draft E.O. leaves determinations of who exactly would have to disclose and how they would have to disclose to the FAR Council, made up of top officials at the Office of Federal Procurement Policy (OFPP), the Department of Defense (DOD), the National Aeronautics and Space Administration (NASA), and the General Services Administration (GSA).

Many within the good government community have questions about the draft E.O., namely regarding vague wording, lack of enforcement mechanisms, and the potential ability to circumvent the order. For example, when the FAR Council sits down to work out the implementation of the E.O., how will it define "affiliates" and "subsidiaries"? These affiliates and subsidiaries will have to be "within [the company's] control." How will the council define that?

What will the enforcement mechanisms be? There are already requirements for lobbyists to fill out disclosure forms whenever they meet with an executive branch official, yet these forms often go unreported because there is no enforcement of the requirement. How will the FAR Council prevent the same thing from happening here?

As for third-party groups and circumvention of the order, it is unclear how far the requirement to disclose indirect political contributions would go. What happens when Company X provides funds to a third-party group and the latter does not use the money to engage in political activities but turns around and provides those funds to another third party that does?

The FAR Council will have many issues to grapple with if President Obama signs this draft E.O. Notwithstanding those questions, if you assume that political contributions are currently influencing the federal contracting process – which does not require a huge leap of faith – then this proposed order is necessary to shed light on the issue. It is reasonable for the government to ensure that the contracting process is free from corruption and undue influence by requiring at least a degree of disclosure by those who are showering political dollars upon it.